Is COVID Delta Variant Hurting Mortgage Forbearance Progress?

Welcome to Sagent’s weekly homeowner hardship briefing where we analyze the latest market data, including the Mortgage Bankers Association’s forbearance data, to offer key takeaways for servicers.

Here’s what’s new this week:

1. Forbearance Re-entries and New Requests on the Rise

This week, according to the MBA’s latest forbearance data through July 25, mortgage forbearance volume has decreased slightly to 3.47% of all mortgage loans (down from 3.48% last week). This means roughly 1.74 million homeowners are still in forbearance plans. 

Perhaps more notable, though, is the rising rate of forbearance re-entries and new forbearance requests. 

As Mike Fratantoni, MBA Senior Vice President and Chief Economist, explained: “”While the overall number of loans in forbearance has changed little in recent weeks, forbearance re-entries have increased, reaching 7.2% this week. Recent economic data continue to show improvement, but it’s clear many homeowners in forbearance still need the relief that is being provided.”

2. Loan Mods and Deferrals Account for Nearly 50% of Forbearance Exits

Another datapoint of note this week is the top two most common forbearance exit methods. As the MBA noted, of the cumulative forbearance exits from June 1, 2020 through July 25, 2021, nearly 50% of forbearance exits were exits made either by loan deferral/partial claim (28.1% of exits) or loan modifications (10.8% of exits).

Surprisingly, borrowers who remain current (23.1%) and borrowers exiting without a plan (15.6%) still remain a factor.

The Bottom Line

This is now two weeks in a row where the drop in forbearance numbers has slowed. Is the delta variant to blame? It remains to be seen but looking more likely by the minute. As we mused last week, this well may be the canary in the coalmine for a broader problem with the delta variant and ongoing struggles for homeowners across the country.